Nearly 60,000 jobs at local factories, offices and hospitals are supported by discount electricity that’s produced hundreds of miles north of Long Island at two dams run by New York State.
That low-cost power can be a deciding factor in whether a business stays on the Island.
MindSHIFT Technologies, a cloud computing provider, decided to expand a data center in Commack instead of moving it elsewhere in the metropolitan area after being awarded 3,700 kilowatts of reduced-cost electricity, the largest allocation for any business in Nassau and Suffolk counties. One thousand kilowatts equal one megawatt, which is enough to meet the needs of 800 to 1,000 homes.
“Low-cost power played a huge part in our decision to expand here,” said Bob Lamendola, a general manager at the company. “We were looking at alternatives to Long Island.”
MindSHIFT’s expansion, on which it is spending more than $21 million, will add 30 jobs to a payroll of 80.
The Virginia-based company uses the electricity to run computer servers and to cool its data center, Lamendola said. MindSHIFT is a subsidiary of Japanese copier company Ricoh.
He projected mindSHIFT will save $25,000 to $30,000 a month once the larger data center is fully operational and the company uses all its allocation from ReCharge NY, a program of the New York Power Authority that provides low-cost electricity to employers.
MindSHIFT is among more than 150 ReCharge NY customers on Long Island, the most of the state’s 10 regions.
Help to big companies
The program aids many big employers, including photography and copier giant Canon U.S.A. and medical supplies distributor Henry Schein Inc., both based in Melville, and Nassau University Medical Center in East Meadow.
The biggest recipient of ReCharge NY power on the Island is nonprofit Northwell Health, the largest private employer in the state. Lake Success-based Northwell has been awarded a total of 5,506 kilowatts for four of its eight local hospitals.
Customers receive allocations of reduced-cost electricity from the state in return for promising to maintain workforces, and in some cases to expand them. The number of jobs on Long Island tied to discount power is about equal to the population of Brentwood.
Together, local customers also have pledged to invest $2.8 billion in buildings and equipment over seven years, according to state records.
The Power Authority estimated its customers in Nassau and Suffolk saved $10.5 million last year on bills totaling about $51 million because of the state’s low-cost power.
The authority is a government-owned utility that was founded by Gov. Franklin Delano Roosevelt in 1931. Its hydroelectric dams near Niagara Falls and the St. Lawrence River generate half the energy provided by ReCharge NY. The remainder is bought on the open market.
Provides ‘anchor’ to LI
Utility executives and economic developers said ReCharge NY is helping to “anchor” employers to Long Island. They said the program has become “an essential tool” for state and local governments to keep businesses here, and possibly attract new ones.
“There’s not a single one of us on Long Island that doesn’t look at our PSEG bill and say, ‘Oh, my god, that’s a lot.’ It’s exponentially worse for businesses” because they use far more electricity, said Tom Stringer, a site selection expert at BDO Consulting in Manhattan.
Since 1999 Stringer, a Brightwaters resident, has helped more than 1,000 companies in the United States and overseas make relocation decisions, including about a dozen that chose to stay here.
“ReCharge mitigates the disadvantage that Long Island has because of its high energy costs,” he said. “The program is extremely necessary if we want to continue to have manufacturers and other high-energy users.”
ReCharge NY was established five years ago by Gov. Andrew M. Cuomo and the state legislature to replace energy incentives in use since the 1990s. The aim was to address complaints about high electric rates on Long Island and elsewhere in the state from businesses, hospitals and other large users.
The goal has been partially met in Nassau and Suffolk based on average rates per kilowatt-hour in May, the most recent available data.
For large office and commercial customers, ReCharge NY power cost 11.26 cents per kwh, compared with 13.68 cents for PSEG Long Island power, according to state and utility data that include expenses for generation and delivery.
The PSEG rate also was higher than the statewide average for large office and commercial customers in May: 13.59 cents per kwh — the ninth highest in the country, according to the federal Energy Information Administration. The federal data include the impact of ReCharge NY’s low rate as well as delivery charges, other fees and taxes.
New York ranked 38th highest in terms of the average rate for factories and other industrial users in May: 5.76 cents per kwh, according to federal statistics.
PSEG delivery fee
On Long Island, ReCharge NY power cost more for industrial customers than the statewide average for such firms — 8.39 cents per kwh — because of a delivery fee charged by PSEG.
PSEG couldn’t provide a comparable local rate for its electricity, saying it has too few industrial customers.
Against this backdrop of electricity costs, the opportunity to reduce utility bills through ReCharge NY gets the attention of corporate and nonprofit executives.
Cuomo and state lawmakers set aside 910 megawatts for ReCharge NY; about 157 MW is still available to be allocated in a competitive process involving reviews by three state boards.
Long Island customers, as a group, have been awarded 76 MW, or about 4 percent of the total electricity consumed by factories, offices and other big users here, according to PSEG.
ReCharge NY allocations are for as long as seven years, an improvement over the prior Power For Jobs program, which had one-year contracts.
Northwell Health uses its discount power at hospitals in Bay Shore, Huntington, Manhasset and New Hyde Park.
Frank Porretto, energy manager for Northwell, said the low-cost power represents about 10 percent of each hospital’s total electric usage. Each saves 10 percent to 15 percent on utility bills, or $1.4 million per year for the group, he said.
Savings benefit patients
“We’re using the savings to enhance our health care,” Porretto said. “That means more nurses and more advanced medical technology to care for patients.”
Northwell has pledged to preserve 17,415 jobs at the four hospitals in return for cheap electricity.
Industrial development agencies, which provide tax breaks to expanding businesses, often include ReCharge NY in incentive packages offered to clients.
The program, while beneficial to local companies, hasn’t yet reached its potential because of the fee charged by PSEG to deliver the low-cost power, said Lisa Mulligan, CEO of the Brookhaven Town IDA.
“We were very, very excited about ReCharge NY when it first came out,” she said. “Then some of the companies that we encouraged to apply for the program received their allocations and there was a handling fee [from PSEG] that they hadn’t been told about. It drove the cost of the energy up. We were a little disappointed.”
For example, the PSEG delivery fee in May accounted for 5.40 cents of the 11.26 cents per kwh cost of ReCharge NY for commercial customers, on average, according to state data. The delivery fee was smaller for factories — 3.13 cents out of an average cost of 8.39 cents per kwh.
John J. Keating, PSEG’s economic development and business marketing manager, said the delivery fee charged to ReCharge NY customers is 29 percent lower than what other customers pay.
“We have to charge to deliver the power. You have to be fair to the rest of the rate base too,” he said.
The Power Authority has no say over PSEG delivery fees.
However, authority officials said they instituted “a hedging strategy” after the winter of 2012-13 to address swings in electric rates caused by higher prices for the half of ReCharge NY power that is purchased on the open market. The strategy involves capping monthly charges and carrying over the excess to future months.
But some Long Island businesses said the hedging plan hasn’t met their needs.
“It doesn’t seem to work some months each year when [the Power Authority’s] costs increase by 50 percent, creating a situation where there is no savings in the program,” said Michael Petrucelli, chief financial officer for United Baking Co. Inc.
The manufacturer of cookies and muffins has 1,216 kilowatts of ReCharge NY power for its Uncle Wally’s plant in Shirley and the recently purchased Silver Lake Cookie plant in Islip. In return the company has promised to employ 235 people at the facilities and saved about $180,000 last year.
Allocations tied to jobs
ReCharge NY can account for up to 70 percent of the electric usage of a business that creates jobs, 50 percent for a business that promises no layoffs and 33 percent for hospitals or other not-for-profit organizations, according to Power Authority rules.
Authority CEO Gil C. Quiniones said ReCharge NY customers are audited annually to ensure they keep employment and investment promises.
Allocations may be cut or removed entirely from those not in compliance, but he said the authority sometimes gives customers the benefit of the doubt.
“We’re not looking to reduce an allocation if we feel that a customer is rebounding and adding back lost jobs,” he said.
On Long Island, the authority found 80 percent of ReCharge NY customers were compliant last year.
Nineteen customers were not, and 16 are receiving less discount power or none at all as of Aug. 1, including CA Technologies, NBTY Inc. and Northrop Grumman — all of whom have fewer workers than they used to.
Still, state Comptroller Thomas DiNapoli said in an audit released last week that the authority could do a better job of policing ReCharge NY.
He said his auditors found 12 ReCharge NY customers, picked randomly from throughout the state, were allowed to “refuse to provide required documentation to confirm reported job retention numbers — without consequences.”
Quiniones countered that all 12 customers provided satisfactory records showing that job promises had been kept.
Lower electric bills due to ReCharge NY aren’t going to end pink slips on Long Island because other expenses are rising: property taxes, health insurance and raw materials.
However, retired National Grid and KeySpan chief Robert B. Catell said ReCharge NY is a potent force.
“The program creates an environment that is conducive to attracting and retaining business on Long Island,” said Catell, a member of the state board that recommends ReCharge NY allocations to the Power Authority’s board of trustees. “If the program were not in place, I think the situation would be much worse, because you would have fewer companies, less jobs — and Long Island would be an even more expensive place.”
POWER ON LI
The state Power Authority’s ReCharge NY allocations help to rein in electricity costs on Long Island.
LARGE OFFICE AND COMMERCIAL USERS
- ReCharge NY on Long Island: 11.26 cents per kwh, on average
- PSEG Long Island: 13.68 per kwh, on average
- All electric utilities statewide: 13.59 cents, on average*
FACTORIES AND INDUSTRIAL USERS
- ReCharge NY on Long Island: 8.39 cents per kwh, on average
- PSEG Long Island: NA
- All electric utilities statewide: 5.76 cents per kwh, on average*
Notes: Figures are for May and include the cost of generation, taxes, fees and delivery charges.
*Includes the impact of ReCharge NY.
Sources: New York Power Authority, PSEG Long Island and U.S. Energy Information Administration